This Week In ETFs: November 6th Edition

It’s been an interesting week in the world of ETFs: U.S. unemployment hit 10.2%, the highest since 1983, while gold traded around $1100/oz. Here are the ETF Database staff picks of the week’s most important and interesting stories from around the Web:

This article discusses the basics of Exchange Traded Notes, or ETNs for short, and the risks that are associated with these unsecured debt instruments. While the benefits of ETNs include minimal tracking error and favorable tax treatment, there are a few downsides to these notes. First off, there are rumors that the tax rules will be changed thanks to a recent adverse tax ruling on the product class from the IRS, forcing ETNs to be classified as debt rather than prepaid contracts as they are now. Another risk is that of credit default. While this seems minimal given the strength of Barclays and Deutsche Bank, the last two years have introduced the term “black swan” into investors’ vocabulary.

We give investors a comprehensive report of all short ETFs that are currently on the market today. In our article, we highlight the risks involved in buying short ETFs, how short ETFs work, and what the advantages are to investors who use short ETFs instead of traditional short selling. There are numerous short ETFs for any investor strategy, including hedging a portfolio against broad market losses or to profit from differences in relative performance across sectors. We also give investors further resources should they want to check out more information regarding this unique market segment.

While the investment world tends to focus on China for emerging market plays in Asia, Malaysia remains an interesting option for investors looking for a diversified fund in a single Asian country. Malaysia is surprisingly well diversified, with holdings in consumer discretionary, industrials, consumer staples and financials. This is in contrast to many emerging markets, such as Russia and Brazil, that are very dependent on oil and agricultural products. This diversification has allowed the iShares MSCI Malaysia Fund (EWM) to have a beta of just 0.82, very impressive for a fund that has outpaced the general U.S. market over the past year.

Discussed in this article are new government investments in smart grid infrastructure and how this will impact commodity stocks and ETFs. The main impact to ETFs would be in both alternative energy funds and equities that would be hurt by a reduction in natural gas and coal consumption – something likely to happen should the smart grid get off the ground. While no pure plays exist, the author highlights several funds that could stand to benefit from increased green investment including the PowerShares WilderHill Clean Energy ETF (PBW) and Market Vectors Global Alternative Energy ETF (GEX).

This article discusses the precarious position of Turkey as the bridge between the European Union and the Middle East. While this hasn’t always been the best position to be in, Turkey is taking advantage of its situation by exporting goods to North Africa and the Gulf and using reforms that are necessary for EU membership to bring stability to an otherwise troubled region. Turkey can currently be accessed by iShares MSCI Turkey Investable Market Index Fund (TUR) which is up over 83% year to date.

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